What if a spouse is the beneficiary of the other’s life insurance and they get a divorce? People to often, find out the hard way what happens. What happens is the spouse named spouse in the life insurance policy is automatically divulged of any interest in the life insurance proceeds. This is discussed in a 1987 opinion from the 14th District Court of Appeals. The opinion is styled, Novotny v. Wittner.
In the cited case, the divorced spouse appealed an adverse decision regarding her rights to the life insurance proceeds.
A divorced spouse is eligible as a beneficiary of a life insurance policy on the life of the ex-spouse. Termination of the ownership interest in a policy does not necessarily destroy the right to receive the policy proceeds as the designated beneficiary. However, the beneficial interest may also be terminated by the divorce decree where it clearly appears from the decree that it was intended not only to segregate the property of the spouses, but also to deprive either spouse of the right to take as beneficiary under an insurance policy on the life of the other.
The trial court specifically found that the language of the decree showed the clear and unambiguous intent of both the parties to terminate both the ownership and beneficial rights of Appellant in and to this life insurance policy. The court also found that the decedent’s death, just twenty-one days after the divorce, made it impossible for him to have had an opportunity to “finalize matters related to the divorce including the changing of the beneficiary” on this insurance policy.
Currently, the Texas Family Code, Section 9.301, makes clear that a spouse is automatically divested of all rights in a life insurance policy with but a couple of exceptions. One of those exceptions is that the divorce decree specifically awards the other spouse the rights to the policy proceeds. Another exception is when the divorced spouse renames the ex-spouse as the beneficiary after the divorce.
What to know about this subject is that it must be discussed with a person’s divorce attorney at the time of the divorce in order to make sure that what happens is intended.